Spotify Stock Jumps 9% as Paid Subscribers Hit 306 Million and Record Margins Ease Wall Street Profit Worries

Shares of Spotify Technology S.A. jumped more than 9% on Thursday after the world's largest music streaming service reported stronger-than-expected subscriber growth and record profit margins and forecast continued growth through the end of the year.

Spotify shares rose $48.29, or 9.2%, to $573.21 in early trading, giving the Stockholm-based company a market value of about $118 billion.

The rally came after the stock had fallen about 22% over the past year.

Subscribers top expectations

Spotify said it had 306 million premium subscribers at the end of the third quarter, up 9% from a year earlier, after adding 6 million paying users during the quarter. The figure beat expectations, with growth across Latin America, Europe, North America and other regions.

Monthly active users rose 11% to 788 million, in line with the company's forecast. Ad-supported users grew 12% to 499 million.

Revenue and margins

Revenue rose 16% to about 5 billion euros, slightly ahead of analysts' expectations. Premium revenue grew 17%, while advertising revenue rose 10%.

Gross margin reached 33%, a record for a third quarter and about 1.4 percentage points higher than a year earlier.

Operating income was 672 million euros, an operating margin of 13.5%, slightly above the company's guidance.

Earnings per share, however, came in below some analysts' estimates.

"Our gross margin came in at 33%, surpassing guidance by 10 basis points," Chief Financial Officer Christian Luiga said on a call with analysts.

Luiga also said that growth in operating expenses "is now coming down meaningfully."

Executives confident

Co-Chief Executive Alex Norström said the company had met the targets it set out the previous quarter.

"We made several commitments last quarter, and they've all landed either in line or better than expected," Norström said.

Strong outlook

For the fourth quarter, Spotify forecast revenue of 5.2 billion euros and operating income of 820 million euros. It expects gross margin to rise to 33.8%.

The company also expects to reach 818 million monthly active users and 316 million subscribers by the end of the year, which would mean adding about 10 million paying subscribers in the quarter.

The profitability story

Spotify spent years focused on growth at the expense of profits, often posting losses as it paid large royalties to record labels and music publishers. In recent years, the company has shifted its focus to profitability, raising subscription prices in many markets, cutting costs and expanding higher-margin businesses such as podcasts, audiobooks and advertising.

That shift has helped transform Spotify into a consistently profitable company and has been a key driver of investor interest in the stock.

The company has also invested heavily in artificial intelligence features designed to personalize listening and keep users engaged, positioning itself to compete as AI reshapes how people discover music and other audio content.

Competition

Spotify competes with Apple Music, Amazon Music, YouTube Music and other streaming services. It remains the market leader by number of users, giving it scale that rivals have struggled to match.

What's next

Investors will watch whether Spotify can deliver on its fourth-quarter forecast, particularly its goal of adding 10 million subscribers during the holiday season. They will also look for continued improvement in margins and for signs that its investments in AI and new content formats are paying off.

The company's ability to raise prices without losing subscribers will also be closely watched, as it remains a key driver of revenue growth.